The Race for AI Dominance is More Global Than you Think

August 21, 2018August 23, 2018

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When people hear about the race for Artificial Intelligence (AI) dominance, they often think that the main competition is between the US and China. After all, the US and China have most of the largest and most well funded AI companies on the planet, and the pace of funding, company growth, and adoption doesn’t seem to be slowing anytime soon. However, if you look closely, you’ll see that many other countries have a stake in the AI race, and indeed, some countries have AI efforts, funding, technologies, and intellectual property that make them serious contenders in the jostling for AI dominance. In this newsletter, we’ll take a look at how countries are strategically positioned with regards to their AI capabilities and ambitions, and see if AI is truly like that of the space race or simply like any other technology trend we’ve seen come and go.

The Current Leaders in AI Funding and Dominance: US and China

In a recent newsletter article, we talked about how AI startups are raising more money than ever. AI-focused companies raised $12 Billion in 2017 alone, more than doubling venture funding over the previous year. Most of this funding is concentrated in US and Chinese companies, but the source of those funds is much more international. Softbank, based in Japan, has amassed a $100 Billion investment fund, with many international investors including Saudi Arabia’s sovereign investment fund and other global sources of capital. While US companies have put up significant investment rounds with the power of Silicon Valley’s VC funds, China now has the most valuable AI startup, Sensetime, which raised over $1.2 Billion and a rumored additional $1 Billion raise on the way. Other massive rounds include $391.5M for Dataminr (US) in June 2018, $200M for Yitu (China) in June 2018 and another $100M in July 2018, $200M round for Orbbec (US) in May 2018, and $100M round for Cambricon (China) in June 2018 on top of a previous $100M raised less than 12 months prior.

However, what makes AI as a technology sector different from previous major waves of investment, is that AI is seen as strategic technology by many governments. About a year ago, China released a three step program outlining its goal to become a world leader in A.I. by 2030. The government aims to make the AI industry worth about $150 billion and is pushing for greater use of AI in a number of areas such as the military and smart cities. Furthermore, the Chinese government has made big bets including a planned $2.1 Billion AI-focused technology research park.

In addition, the Chinese technology ecosystem has developed to become a powerhouse in its own right. China has many multi-billion dollar tech giants including Alibaba, Baidu, Tencent, and Huawei Technologies, who are each heavily investing in AI. Chinese companies also work more closely with the Chinese government, and laws in China are the most relaxed with regards to customer privacy and use of AI technologies such as facial recognition on their citizens. China’s government has already embraced the use of facial recognition technology and has quickly adopted this technology in everyday use. In most other counties such as the US for example, privacy concerns prevent pervasive use of facial recognition technology, but such concerns or impediments to adoption don’t exist in China.

The story of technology company creation and funding in the United States is already well known. Silicon Valley is both a region as well as a euphemism for the entire tech industry, showing how dominant the US has been for the past several decades with technology creation and adoption. Venture capital as an industry was invented and perfected in the US, and the result of that has been the creation of such enduring tech giants like Amazon, Apple, Facebook, Microsoft, Google, IBM and thousands of other technology firms big and small. Collectively trillions of dollars has been invested in these firms by private and public sector investors to create the technology industry as we know it today. Certainly, none of that is going away anytime soon.

In addition, the US has an extremely well developed, and highly skilled labor pool with academic powerhouses and research institutions that continue to push the boundaries of what is capable with AI. What is notable is that even in the US, the dominance of Silicon Valley as a specific, San Francisco-bay geographic region is starting to slip. The New York city region has produced many large AI-focused technology firms, and research in the Boston-area centered around MIT and Harvard, Pittsburgh with Carnegie Mellon, the Washington, DC metro area with its legions of government-focused contractors and development shops, Southern California’s emerging tech ecosystem, Seattle-based Amazon and Microsoft, and many more locations in the US are loosening the hold that Northern California has on the technology industry with respect to AI. And just outside the US, Canadian firms from Toronto, Montreal, and Vancouver are further eroding the dominance of Silicon Valley with respect to AI.

However, recently immigration laws had made it more difficult to attract and retain foreign talent and there has also been a reduction to government funding of AI research which may provide some setbacks. The majority of AI innovation in the US is being driven by the private sector, mostly large corporations and startups as the government’s own investment has been lackluster in comparison to that of China and other countries. The question remains whether the US will be able to maintain its technology dominance in AI as it has previously in other areas.

Countries With Significant Stakes in AI

As mentioned above, what makes the AI industry unique is that it is actually not a new thing, but rather evolved over decades, even prior to the development of the modern digital computer. As a result, many technology developments, investment, and intellectual property exists outside the US and China. Countries that have been involved with AI since the early days are realizing the strategic nature of AI and doubling down on their efforts to retain a stake in global AI share and maintain their relevance and importance.

Japan

Japan has long been a leader in the AI industry, and in particular their development and adoption of robotics. Japanese firms introduced concepts such as the “3 D’s (K’s)” of robotics that we discussed in our research on cobots. Not only is their technology research excellence on par with anywhere in the world, they have the funding to back it up. As mentioned earlier, Japan-based Softbank is an investor powerhouse unrivaled in the venture capital industry.

Japan’s government released their Artificial Intelligence Technology Strategy in March 2017. This strategy includes an Industrialization Roadmap and focuses the development of AI into three phases: the “utilization and application” of AI through 2020, the public’s use of AI from 2025-2030, and lastly an “ecosystem built by connecting multiplying domains”. The country’s strategy focuses on R&D for AI, collaboration between industry, government, and academia to advance AI research, and addressing areas related to productivity, welfare and mobility.

However, it is important to note that while Japan continues to exhibit dominance in robotics and other AI fields as well as its Softbank powerhouse, many of the firms that Softbank is investing in are not Japan-based, and so much of the investment is not remaining focused on Japan’s own AI industry. In addition, while technology development is advanced and rapidly progressing and while Japan is known as a country to embrace technology, many Japanese companies have not been quick to embrace AI technology and the use of AI is largely limited to the financial sector and concentrated in the manufacturing industry. The country is also facing significant demographic pressure, with an aging population, causing a shortage in available workforce. On the one hand, the adoption of AI and robotic technologies are seen as a solution to labor and aging demographics, on the otherhand, the lack of workforce will cause strategic problems for creation of AI dominant companies.

South Korea

South Korea’s government is a significant investor and strong supporter of local technology development, and AI is certainly no exception. The government recently announced it plans to spend $2 billion by 2022 to strengthen its AI R&D capability including creating at least six new AI schools by 2020, with plans to educate more than 5,000 new high quality engineers in Korea in response to a shortage of AI engineers. The government also plans to fund large scale AI projects related to medicine, national defense, and public safety as well as starting an AI R&D challenge similar to those developed by the US Defense Advanced Research Projects Agency (DARPA). The government will also invest to support the creation and development of AI startups and businesses. This support includes the creation of an AI-oriented start-up incubator to support emerging AI businesses and funding for the creation of an AI semiconductor by 2029.

South Korea is home to many large tech companies such as Samsung, LG, and Hyundai among others, and is known for it’s automotive, electronics, and semiconductor industries as well as the use of industrial robotics technology. It also famously hosted the match where DeepMind’s AlphaGo defeated Go’s world champion Lee Sedol (a Korean-native). Clearly, you can’t count South Korea out of any race for AI dominance. The only thing significantly lacking is a well-developed venture capital ecosystem and a large number of startups. South Korea’s AI efforts are almost entirely concentrated in the activities of the major technology incumbents and government activities.

United Kingdom (UK)

The U.K. is a clear leader for AI in Europe and the government is financially supporting AI initiatives. In November 2017, the UK government announced £68 million of funding for research into AI and robotics projects aimed at improving safety in extreme environments as well as funding four new research hubs that will be created to help develop robotic technology to improve safety in off-shore wind and nuclear energy. It has a goal to invest about $1.3 billion in AI investment from both public and private funds over the coming years. As part of this plan, Global Brain, a Japan-based venture capital firm, plans to invest about $48 million in AI-focused UK-based tech startups as well as open a European headquarters in the United Kingdom. Canadian venture capital firm Chrysalix also plans to open a European headquarters in the U.K. as well as invest over $100 million in UK-based startups who specialize in AI and robotics. The University of Cambridge is installing a $13 million supercomputer and will give U.K. businesses access to the new supercomputer to help with AI-related projects.

The U.K. is of course also the home of Alan Turing, renowned forefather of computing and an early proponent of AI, with the namesake “Turing Test”. The UK can also claim (in not such a great light) to be one of the precipitating factors of the first AI Winter when the Lighthill Report was released in 1973 leading to significant declines in AI investment. As such, the UK has exhibited in the past significant influence positively, and negatively, in worldwide AI spending and adoption. To avoid future problems, the U.K. is looking to position itself as a world leader in ethical AI standards. The UK sees this as an opportunity to position itself as an AI leader with ethical AI, helping to create standards used for all. It knows it can’t compete with AI funding and development from counties like the US and China but thinks it has a shot by taking an ethical standards approach and leveraging its early status as a lead in AI development.

France

France’s President Emmanuel Macron released a national strategy for artificial intelligence in early 2018. The country announced that over the next five years it will invest more than €1.5 billion for AI-related research and support for emerging startups in a bid to compete with the US, China, and others for AI dominance. The French strategy is to put an emphasis on and target four specific areas of AI related to health, transportation (such as driverless cars), the environment, and defense/security. Some notable AI researchers and data scientists were educated in France, such as Facebook’s head of AI Yann LeCun. France wants to try to keep that talent in France instead of moving to overseas companies.

Many companies such as Samsung, Fujitsu, DeepMind, IBM and Microsoft have announced plans to open offices in France for AI research. The French administration also wants to share new data sets with the public making it easy to access and build AI services using those data sets. The caveat to receiving public funds is that research projects or companies financed with public money will have to share their data. Many European Union (EU) officials have expressed dismay with the way that Facebook, Google, Microsoft, Amazon, and others have hoarded user data, and Macron and his administration are concerned about the “black box” of AI data and decision-making. France is also focused on addressing the ethical concerns around AI as well as trying to create unbiased data sets which is part of the reason for open algorithms and data sets. While France’s efforts are significant, they pale in terms of total money put into the industry and resources available to compete with the efforts of other nations.

Germany

Germany is an industrial powerhouse, has long been known to have great engineering capabilities, and Berlin is currently Europe’s top AI talent hub. According to Atomico’s 2017 State of European Tech report,Germany is most likely to become a leader in areas such as autonomous vehicles, robotics and quantum computing. In fact, almost half of all worldwide patents on autonomous driving come from German car companies or their suppliers such as Bosch, Volkswagen, Audi and Porsche. These German companies had begun their autonomous vehicle development activities as early as 1986.

A new tech hub region in southern Germany, called Cyber Valley, is hoping to create new opportunities for collaboration between academics and businesses with a specific focus on AI. The new hub plans to focus on AI and robotics, make better use of research talent, and collaboratively work with companies such as Porsche, Daimler and Bosch. In addition to autonomous vehicles, Germany has an early lead with robotics, with one of the first cobots developed in Germany for use in manufacturing. Despite these intellectual property and early market leads, Germany has not invested at the same levels as other countries, and the technology firms are highly concentrated in manufacturing, automotive, and industrial sectors, leaving other markets mostly untapped with AI capabilities. Furthermore, American automakers such as Ford, GM, and Google Waymo, as well as Uber and other firms are quickly catching up with the number of patents issued and threatening Germany’s dominance for intellectual property in that area.

Russia is still a world superpower in terms of military might, and exerts significant influence in world markets, especially in the energy sector. Despite that, Russian investment in AI is still significantly lacking that of other countries, with only a reported $12M invested by the government in research efforts. While Russia has had significant input and efforts around AI research in the university setting, the country’s industry lacks overall AI talent and number of companies working towards AI related initiatives. Many skilled Russian engineers leave the country to work at other firms worldwide who are throwing lots of money at skilled talent. As such, the biggest application of AI in Russia is in physical and cyberwarfare situations, leveraging AI to enhance the capabilities of autonomous vehicles and information warfare. In this arena, Russia is certainly a country to be contended with regards to AI dominance.

Other AI Hotspots

In addition to the above, Cognilytica is monitoring many activities in countries and regions such as the European Union (EU), Denmark, Sweden, Estonia, Finland, Poland, Singapore, Malaysia Australia, India, Italy, Canada (as mentioned earlier), Taiwan, the United Arab Emirates (UAE), and other locations. Some of these countries have more financial than technical resources, or vice-versa. The key is that for each of these countries, they see AI in a strategic light and as such they’ve crafted a strategic approach to AI.

The Goal of AI Strategic Domination

AI technologies have the ability to transform and influence the lives of many people. Not only will AI transform the way we work, interact with each other and travel between locations, but it also has an impact on weapons technology, modern warfare, and a country’s cyber security. AI can also have dramatic impact on the labor market, disrupting entire industries and creating whole new ones. As such, having a focus on AI dominance can also help strengthen that country’s economy, shift global leadership and power, and give military advantages. While the race for AI domination might seem similar to the Space Race or aspects of the Cold War, in reality the AI market doesn’t support a winner take all approach. Indeed, continued advancement in AI requires research and industry collaboration, continued research and development, and industry-wide thinking and solutions to problems. While there will no doubt be winners and losers in terms of overall investment and return, countries worldwide will reap the benefits of increased adoption and development of cognitive technologies.

Cognilytica will continue to track and pay attention to how countries are strategically approaching AI. Stay tuned for a deeper analysis on this subject, where we review in more detail each country’s AI capabilities, strengths, weaknesses, and overall position in regards to AI technology.

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